Contracting

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A vital asset

“A verbal contract isn’t worth the paper it is written on” – Sam Goldwyn
“Until the contract is signed, nothing is real” – Glenn Danzig

A protection

You have negotiated a fantastic deal (maybe we helped you?) at the beginning of the year. Everything works fine. All a sudden, your supplier calls you to announce a price increase because of a rise in energy cost. The deal was formalised in an email and there was no rule for price escalation. You can try to renegotiate but you are not at your advantage. A contract could have protected you against this pitfall.

The benefits

In a contract, you write down everything that constitute the basis of the agreement with your supplier across a set period of time:

  • The scope of work to prevent your supplier to deliver only part of the agreed solution/product
  • The price structure, its validity, price escalation mechanism (if needed), payment terms
  • Liabilities, responsibilities and course of action if something goes wrong

Terms and conditions

Having your own set of Terms and Conditions (T&C) can be a real asset for your company. You set the conditions under which it is acceptable for you to do business with another entity. It is a powerful tool in negotiations if you have sent the T&C with your RFQ. Indeed if your T&C are more favorable for the buyer, you will be a step ahead of the seller who will have more points to negotiate.

A benefit for both parties

A contract is also a protection for your suppliers against late/non payment, unreasonable change of scope of work or liabilities in case of an accident to name a few. Remember that you can only be successful if your suppliers are successful.

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